On the 4th, the yen exchange rate in the Tokyo foreign exchange market hit a three-month high of 146 yen to the dollar. This is a continuation of the trend of dollar selling and yen buying in overseas markets last weekend, when U.S. interest rates fell sharply in response to the downturn in manufacturing indexes and a speech by Federal Reserve Chairman Jerome Powell. . The Tokyo market will be closely watching whether there will be any evidence to encourage yen buying at a monetary policy workshop held by the Bank of Japan on the same day.
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Yukio Ishizuki, senior foreign exchange strategist at Daiwa Securities, points out that the market continues to be biased toward a stronger yen and weaker dollar. Regarding Chairman Powell’s speech, he said, “He tried to reverse the market’s predilection for interest rate cuts following Fed Waller’s remarks last week, but his message was perceived as weak.”
The yield on 2-year U.S. Treasuries on the 1st was around 4.54%, down 14 basis points (bp, 1bp = 0.01%) from the previous day, following the November Institute for Supply Management (ISM) manufacturing industry index, the lowest level since June. Ends with. In his speech, Fed Chairman Jerome Powell cautioned against expectations of a rate cut, saying the Fed is ready for further tightening if necessary, but also said that the Fed’s policy is “very much in the realm of economic suppression.” In the interest rate swap market, the probability of an interest rate cut by March next year has risen to over 70%.
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The yen has been on an upward trend since late November due to falling US interest rates and dollar selling.Fed Director Waller, who was seen as a hawk, becomes a dove as US economic indicators stand out below expectations.Expectations of a rate cut are increasing due to his comments.
The Bank of Japan will hold its first workshop on a multilateral review of monetary policy on the 4th. If speculation about policy normalization strengthens, there is a possibility that the yen selling position, which has accumulated at a high level, will be prompted to be adjusted. Ishizuki believes that, “If there are many mentions of the side effects of unconventional monetary policy, there is a possibility that the market will start pricing in an exit.”
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2023-12-03 22:23:00
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